4.

4 Market research

IB Business Management
4.4 Market research
By the end of this chapter, you should be able to:
Explain why and how organisations carry out market research
Analyse the primary market research methods
Comment on the secondary market research methods
Discuss the ethical considerations of market research
Distinguish between qualitative and quantitative research
Explain the various sampling methods
Interpret results from given data
Market research
Process of collecting, analyzing, and reporting objective data
about a market, consumers, and competitors.
Businesses use market research information to make decisions.
Essential in creating a successful product and in marketing it
effectively.
Crucial in working out the market size, the growth rates, the
market share held by rival businesses, and the needs of
consumers.
Importance of market research
Decisions focused on the customers needs.
Stay in touch with the market and with what customers want.
Anticipate future needs or trends.
Be the first to react to a profitable new opportunity.
Importance of market research
Four main reasons can be identified:
To describe who the business customers and competitors
are and what is happening in its market.
To explain why trends occur.
To predict what might happen next.
To explore how consumers might react to new ideas and
use this knowledge to make key marketing decisions.
Market research
Benefits
Helps to identify the wants and
needs of customers.
Allows the business to design
and vary its marketing mix.
Enables a swifter response to
changes in customer needs,
allowing the business to stay a
step ahead of its competitors.
Research into existing
competition allows a business
to spot a gap in the market.
A new product can be developed
and launched with greater
confidence in its future success.
The wasted expense of failed
products or promotions can be
reduced or eliminated.
Drawbacks
Without clear objectives,
research may produce irrelevant
information or leave important
questions unanswered.
The sample may be
unrepresentative of the total
population due to a small
sample size, bias in the method
of choosing respondents or
poorly constructed questions.
Even with a carefully
constructed sample, the results
cannot provide 100 per cent
accuracy.
Respondents may provide
answers they think the
interviewer wants to hear rather
than their true views.
Primary market research
First-hand research.
Also known as field research.
Data collected directly from consumers.
Large businesses often employ market research companies but it
can be very expensive.
Can be carried out through surveys, interviews, focus groups, and
observation.
Surveys
Questionnaires can be used to ask pre-set questions of a large
number of people.
The questionnaire may contain different types of questions
(yes/no, multiple choice, open-ended, etc.).
Used by an organization to ensure that their marketing mix is
correct.
May be face-to-face, by telephone, by mail, or online.
A sample is chosen to be questioned.
The more people who are asked, the greater the degree of
confidence the business can have in the accuracy of the results.
Surveys
Advantages
They enable researchers to
collect a large amount of data in
a relatively short period of time.
If designed well, surveys can be
administered and completed
easily by the respondents.
Surveys can be used to collect
information on wide range of
aspects including attitudes,
preferences, and opinions.
Disadvantages
Surveys that are poorly
constructed and administrated
can undermine otherwise well-
intended research.
The answers provided by
respondents may not be an
accurate reflection of how they
truly feel, with some results also
being biased.
As large samples are usually
used, surveys can prove to be
costly and use up a lot of time in
their construction and
administration.
Interviews
A conversation during which the interviewer asks the interviewee
questions in order to get information.
To gain more detailed, qualitative information from a smaller
group of people.
The interviewer spends longer with each respondent, asking them
a wide range of questions and exploring their responses more
deeply.
Are often led by the customers comments and will not necessarily
follow set questions.
The interviewer must be well trained and the information gained
must be properly recorded and analyzed.
When carried out professionally, this method may generate
information that explains and explores issues far more effectively
than any other market research method.
Interviews
Advantages
They can provide detailed
information about the
perceptions and opinions of
consumers through in-depth
questioning.
They usually achieve a high
response rate because of the
one-on-one attention provided.
Disadvantages
The whole process can be very
time-consuming as it involves
setting up the interview, carrying
it out, analysing responses,
gathering feedback, and
reporting.
Some interviewers may be
biased, therefore influencing
interviewees responses.
Focus groups
Small number of people brought together to discuss a specific
product or idea.
The group comprises individuals who are representative of the
customers of the business or of a specific segment of customers.
Crucial stage in the development and launch of a new product.
Assesses the reaction of potential consumers.
Vital to test and experiment with new products ideas.
Manufacturing companies may build a prototype for testing and
showing to prospective customers.
Consumer panels are groups of consumers who are asked to give
their opinions on ideas or products over a period of time.
Focus groups
Advantages
As focus groups consist of a
small group of individuals, using
them is a cheap and easy way of
gathering market research.
They can be used to measure the
reaction of customers to a firms
new product or to the firms
strategies.
They help identify key product
requirements as well as other
needs not addressed by the
business and its competitors.
They provide insights on the
current position of the firms
competitors in the mind of the
customer.
Disadvantages
The business may seek
information about the entire
market or segment and it could
be that the opinions of a small
number of individuals do not
reflect it.
There is the possibility that
some members of the group
may not express their honest
and personal opinions on the
discussion topic.
Focus groups are more costly to
carry out than surveys as each
participant usually has to be
compensated in cash or in kind.
Observation
Involves watching consumers as they shop, measuring pedestrian
flows in a town center or looking at how rival products are
packaged and displayed.
Conclusions about shoppers from observing their behavior, such
as where they go when they enter a store, or how long they spend
selecting a product from the shelves.
Information can be used to improve store and shelf layout or
point-of-sale promotions.
Observation of consumer behavior cannot answer questions
about why customers act in certain ways.
Observation
Advantages
It is a direct method of
collecting data or information
when studying actual human
behaviour, as the researcher
can see exactly how people
behave in a given situation.
A large number of individuals
can be surveyed in a short
space of time.
Observation is usually a cost-
effective way of gathering data.
Disadvantages
Complete answers to any
problems or issue cannot be
obtained by observation alone,
so market researchers need to
combine this with other
methods such as issuing
questionnaires.
Observation cannot be used to
study attitudes or opinions of
individuals because this usually
requires a verbal response from
the participant.
Activity
What methods of primary research would you use to collect
information about the following products or services?
A new alcopop drink
A handheld computer
A bank
Breakfast cereals
Portable MP3 players
A new restaurant
Tennis shoes
Secondary market research
Second-hand research.
Also known as desk research.
Based on data that has already been collected.
Significantly cheaper than primary market research.
Useful in providing a good background picture.

Drawbacks
The data is likely to be general. Secondary research will not be
targeted specifically to a particular companys needs.
The data may not be current. Reports age very quickly in fast-
moving markets.
Secondary market research
Academic journals
Media articles
Government publications
Market analyses (Commercial data)
Sales records
Customer information
Survey data
Information about competitors
Local libraries
Business links
Academic journals
Publications of scholarly articles written by experts.
The articles should be well referenced to provide the exact source
of the information given.
The experts will usually include professors, graduate students, or
others with first-hand experience in a particular subject.
Academic journals are written for the sole purpose of providing
and distributing knowledge and not as a money-making
opportunity.
Academic journals
Advantages
Academic journals undergo a
peer-review process where they
are checked by academics and
other experts. This increases
the reliability of the information.
Most academic journals include
reports, reviews of current
research, and topic-specific
information. They are therefore
good sources when a firm is in
need of original research on a
topic.
They take less time to publish
than books.
Disadvantages
Since they contain information
of very specific academic
interest, they may not be the
best source for general-interest
topics.
The peer-review process can be
time-consuming, which may also
affect the provision of the latest
or current event information.
Media articles
These includes newspapers and magazines.
A newspaper is a printed publication containing news, feature
articles, advertisements, and correspondence.
Once viewed as the dominant means of communicating world
events, newspapers have declined in readership since the rice of
television and the Internet.
Media articles
Advantages
Communicating via a
newspaper is cheaper than
communicating via television.
Most serious newspaper articles
have been well researched,
written with reliable sources,
and edited for accuracy, which
is not the case for some internet
resources.
They are widely available and
can be found in many retail
stores.
Disadvantages
It is difficult to communicate
events in real-time. As the process
of producing content, printing,
and distributing the finished
paper is time-consuming, articles
that were written may be out of
date by the time they are
delivered to the customer.
Newspapers can be biased,
depending on the type of
organization that owns them.
The process of producing
newspapers could be considered
a waste of paper and energy
resources.
Government publications
These are articles produced by the government on a wide variety
of topics.
They could provide businesses with useful information on the
population census in a country, statistics on social trends, or even
surveys on consumer expenditure patterns.
Market analyses
These include commercial publications or market intelligence
reports that gather data about particular markets.
The highly detailed reports are usually carried out by specialist
market research agents.
They can be sourced at various local business libraries, but they
are quite costly.
 Example Average mans
gross earnings by
age (per week)
Men Are So Average Age ($)

Percentage of men in employment 80% 16-24 274

Average mans weekly gross pay $452 25-34 416

Number of hours the average man works 44 per week 35-44 492
Average mans lunch Sandwich
45-54 505
Average mans holiday entitlement 24 days per year
55-64 437
Top reasons why average man is looking Unsatisfactory pay; wants shorter hours;
for new work unsatisfactory commute to work; threat of 65+ 408
redundancy
Source: Mens Health
magazine survey,
March 2002

If a company were to use this information, would it be classified as primary or

secondary data?
Calculate the annual gross pay of average man (ignore age).
Calculate the hourly wage rate of average man (ignore age).
Explain the problems with using averaged data such as this.
Why might a firm choose to use secondary rather than primary research?
Market research
Businesses that use market research effectively are likely to use a
combination of primary and secondary research.
This can minimize the cost, while maximizing the quality of
information gathered.
Spending time and money on the research can save far more in
the long run if it results in the correct decisions on the
organizations marketing activity.
Qualitative and quantitative research
Qualitative research is collecting, analysing and interpreting data
by observing what people do and say.
Qualitative research refers to the meanings, definitions,
characteristics, and descriptions of things.
Common methods used in collecting qualitative data include the
use of focus groups and in-depth interviews.
Quantitative research refers to counts and measures of things.
Surveys and government publications are methods usually used
to collect quantitative data.
Quantitative research may seek answers to the question: How
many customers bought the companys sports shoes in the month
of May 2013?
Qualitative research may seek answers to the question: Why do
customers like the companys sports shoes?
Qualitative and quantitative research
Qualitative research
This involves the collection of data about
opinions, attitudes or beliefs.
Information is open to a high degree of
interpretation.
It is subjective.
Key research questions would include Why?
The researcher is part of the process.
It provides multiple realities, i.e. the focus is
complex and broad.
Quantitative research
This involves the collection of numerical data or
data that can be measured.
Information is open to less interpretation.
It is objective.
Key research questions would include How
many?
The researcher is separate.
It provides one reality, i.e. the focus is concise
and narrow.
Sampling methods
In reality there is simply not enough time, energy, money, labour,
or equipment to carry out a survey of the whole population.
The population comprises all potential consumers in a market.
However, in an effort to gather adequate primary research and
still have a clear idea of consumers views, taking a sample of the
population is required.
A sample is a small group of people selected to represent the
population or target market under research.
For example, a small group of consumers could be selected out of
a large number of potential buyers of a product.
Sampling is simply the process of selecting the appropriate
sample.
Sampling methods
Quota sampling
Random sampling
Stratified sampling
Cluster sampling
Snowballing
Convenience sampling
Quota sampling
Involves segmenting a given population into a number of groups
that share certain characteristics (mutually exclusive sub-groups)
such as age or gender.
Targets are then set for the number of people who must be
interviewed in each segment.
For example, in a school of 500 students offering the IB diploma
programme, a researcher may target 15 males and 20 females to
interview regarding their perception of the programme.
Quota sampling
Advantages
This is a quick and cost-effective
sampling method, especially
where the proportions of the
different groups in the
population are known.
Findings obtained are usually
more reliable than those of
random sampling.
Disadvantages
Results obtained are not always
statistically representative of
the population as random
sampling is not done; this also
leads to statistical errors.
The interviewer may be biased
in the selection of interviewees
and choose those who will
cooperate most in the process.
Random sampling
Every member in the population has an equal chance of being
selected as part of the sample.
The sample of respondents is selected randomly.
With technology, a list of random numbers can be generated from
a target population by the use of a computer.
An example of selecting a random sample may be choosing any
50 people from a telephone directory containing the names of
1,000 people.
Random sampling
Advantages
Random sampling reduces bias
as everyone has an equal
chance of being chosen.
It is a relatively easy way of
obtaining a sample.
Disadvantages
The sample chosen may be too
small and/or it may not consist
of the target population: a
larger, more representative
sample may have to be
selected.
Stratified sampling
The target population is made up of many different groups who
are subdivided into segments or strata that share similar
characteristics.
Members are then chosen from each stratum to form a
representative sample.
For example, a secondary school may be deciding to introduce a
new school uniform. It may divide the school population based on
the different forms, from Form I to Form 5. A random sample is
then chosen from each of these forms, ensuring that the same
proportions of the sample in each category is maintained.
Stratified sampling
Advantages
The sample selected is more
representative of a particular
target population.
Disadvantages
It is not easy to select relevant
strata from a population of very
similar characteristics.
Cluster sampling
Appropriate method to use when the population is geographically
dispersed.
Involve selecting a group from each region (cluster) and then
taking a random sample from the clusters.
For example, a multinational wishing to set up a plant in a certain
town may carry out research on just a few geographical areas
around the location and the opinions of the clusters selected will
be assumed to represent the whole population.
Cluster sampling
Advantages
It is a quick and cheap method
of carrying out research from
widely geographically dispersed
populations.
Disadvantages
Results obtained may not be
representative of the whole
population and may be biased,
especially if the cluster sample
is obtained from areas where
people share similar
characteristics.
Snowballing
Process of sampling that involves surveying the first group or
individual who then suggests other groups or individuals who
could participate, and so on.
Members of the initial group use their contacts to refer to other
people that they know, hence the snowball effect.
It may be used when conducting quite sensitive research, for
example a survey done on the use of ARVs among HIV-positive
individuals.
It is also used when researching
expensive sophisticated products
where the range of potential
customers is limited.
Snowballing
Advantages Disadvantages
It is a cost-effective method of There is potential for getting a
obtaining information through biased sample, since friends
referrals. sharing similar lifestyles may
refer each other and be part of
the same sample.
Convenience sampling
Groups are selected based on their easy access and proximity to
the researcher.
For example, a teacher doing research on the school canteen
could conduct a study by being physically present and directly
interviewing students purchasing items from the canteen at break
time or lunch time.
Another example would be when conducting research in a
hospital, when the researcher may use the first ten names in the
patient list to select a sample.
Convenience sampling
Advantages
It is a fast, easy and cheap
method of sampling because
the research groups are readily
available.
Disadvantages
The sample may be biased and
not be representative of the
entire population.
Results of data collection
Businesses are interested in the range of results they get from
carrying out research.
It is of prime importance that they ensure that their data
collection methods are appropriate and offer a high degree of
accuracy.
A combination of qualitative and
quantitative data is essential to
maintain integrity in the research
process.
Selecting the appropriate data
collection instruments and providing
clear instructions for their correct use
reduces the likelihood of sampling
errors occurring.
Results of data collection
Benefits of properly collected data include:
The ability of research to answer accurately the research
questions posed.
The ability of repeat and validate a particular study where needed.
Increased accuracy of findings resulting in efficient use of
resources.
Good opportunity for other researchers to pursue areas needing
further investigation.
Results of data collection
The heart of research is gathering reliable information about an
issue or intervention and analysing it to determine the
significance of the sample results.
Collecting and analysing quantitative data can help highlight
connections (correlations) among variables and also address
other factors the researcher may not have considered.
Collecting and analysing qualitative
data con provide insight into the varying
participant experiences, including what
they need to be improved or changed.
On gaining the required knowledge from
the research information provided, a
researcher should continue evaluating
the whole process in an effort to obtain
even better results in the next research.
Sources
Stimpson, P., Smith, A. (2015) Business Management for the IB
Diploma. Cambridge
Lomin, L., Muchena, M., and Pierce, R. (2014) Business
Management. Oxford
Clark, P. and Golden, P. (2009) Business and management
Course Companion
Gutteridge, L. (2009) Business and Management for the IB
Diploma
Thompson, R. and Machin, D. (2003) AS Business Studies